Chem firms post mixed 2Q results; Rohm & Haas beats street

22 July 2005 17:00[Source: ICIS news]

?xml:namespace>NEW YORK (CNI)--The chemical industry is putting up decent numbers in the second quarter, particularly the specialty chemical players.

Rohm and Haas (R&H) surged past Wall Street expectations with robust profit gains, as did Albemarle. However, on the commodity side, Nova Chemicals posted a loss on production disruptions and a tougher pricing environment.

“Our performance reflects the ongoing emphasis on implementing price increases to recover extraordinarily high raw material and energy costs, while maintaining tight control over our expenses,” said chairman, president and chief executive Raj Gupta.

However, he noted that demand remains anemic in Europe while growth in the building and construction markets in Asia Pacific has slowed. The company is seeing solid growth in electronic materials as well as decorative coatings in North America.

While demand remained sluggish across some markets, especially in Europe, R&H plans to manage its portfolio for value by shedding lower margin products.

Looking ahead, the company expects full year sales growth of 8 to 10% and eps in the range of $2.75-$2.90, representing gains of between 25 to 32%.

Albemarle posts gain but stock falters

Albemarle posted a 50% gain in underlying second quarter profits to $29m on 54% higher acquisition-fueled sales of $503m. Eps of 60 cents came in a penny ahead of Wall Street estimates, but volume weakness in polymer additives sent shares down.

However, investors were less than impressed, sending shares of Albemarle down $1 to $37 on the news.

“Despite reporting a solid second quarter with earnings above expectations, signs of polymer additive volume weakness early in the third quarter resulted in Albemarle shares dropping 3.5%,” noted Deutsche Bank Securities analyst David Begleiter. “While we expect this volume weakness to be short-lived as end market demand has not weakened recently, uncertainty over volume growth will likely keep Albemarle shares range-bound near-term.”

Nova posts $25m loss

Nova posted a loss of $25m, or 29 cents in the second quarter, as the company was plagued by three unusual events - the 16 April Corunna power outage ($20m after-tax), the 21 June Joffre ethane interruption ($4m) and an insurance accrual ($15m). Wall Street had been expecting a profit of 9 cents per share.

Excluding the unusual events, Nova would have posted net income of $14m in the quarter versus $27m in the year-ago period and $94m in the first quarter of 2005. Sales rose 7% year-over-year to $1.33bn.

“It is pretty clear our industry was impacted by a large global inventory correction during the second quarter as customers consumed much more of our products than they purchased,” said president and chief executive Jeff Lipton. “We saw a number of positive signs in June indicating that customers were again buying to meet their full production needs, and we expect the third quarter to begin a return to stronger business conditions for our industry.”

In the olefins/polyolefins sector, net income of $45m was down from $112m in the first quarter. Polyethylene prices were down 11% on 4% lower volumes.

Despite the tough results, Nova has authorised a stock buyback of up to 10% of its public float, representing 7.25m shares. At today’s share price of around $36, the buyback would cost about $260m.

“We believe that buying Nova Chemicals’ common shares represents an effective use of the company’s financial resources,” said Lipton.

Methanex strong and steady

Methanex posted a 20% gain in second quarter profits to $62.9m, or 53 cents per share on flat sales of $411m. However, profits were down from $76m earned in a strong first quarter.

“Methanol pricing remained strong and relatively stable in the second quarter, underpinned by continued high global energy prices,” said president and chief executive Bruce Aitken. Methanex’s average realised price for the second quarter was $256/tonne versus $225 for the year-ago period and $262 in the first quarter.